Working Capital

Working capital = current assets − current liabilities: what you have that converts to cash within a year (cash, receivables, inventory, prepaids) minus what you owe within a year (payables, accrued expenses, the current portion of debt, deferred revenue obligations). Positive working capital means short-term obligations are covered by short-term resources.

The number matters less than its components and trend. You can be sitting on positive working capital that's entirely stuck in slow receivables while payables are overdue — technically fine, practically brittle. For subscription businesses, deferred revenue is a big current liability, so a growing book of annual prepayments can push working capital negative even as cash piles up — another case where one number without its breakdown misleads. What kills companies is a working-capital gap: paying suppliers in 15 days while customers take 90.